Industry players call for scrapping of HVGT or 'luxury tax' in favour of GST

Expensive cars are likely to incur a 'luxury tax'.

PETALING JAYA: Industry players and stakeholders have called for the proposed High-Value Goods Tax (HVGT) to be scrapped to pave the way for a better and more comprehensive tax system like the Goods and Services Tax (GST).

They said the limited revenue to be derived from the HVGT does not warrant its implementation.

Associated Chinese Chambers of Commerce and Industry of Malaysia treasurer-general Datuk Koong Lin Loong said the HVGT lacks a clear system and mechanism.

“It not only affects the overall Malaysian economy but also poses difficulties for businesses, especially the retail sector, due to the complicated HVGT refund system,” he said.While establishing the thresholds of various high-value goods is essential, Koong added that it is a difficult thing to do.

“For instance, gold – it can be viewed as a non-essential luxury item, ornament, investment or a form of savings, making its classification under the HVGT perplexing,” he said.

Koong also highlighted the possible inconsistency in the treatment of luxury electric vehicles.

“Although they are exempt from certain taxes, they are still subject to HVGT,” he said.

Ultimately, consumers may face higher taxes – the multiple tax system would create a negative perception of the country’s economy.

“Replacing the HVGT, service tax and sales tax with the GST will establish a fairer system that includes an input and output tax refund mechanism,” he added.

He also said the government’s decision to not reintroduce the GST is “purely political” despite being aware of its benefits. “A comparison of the weaknesses of the Sales and Service Tax (SST) before April 2015 and the advantages of GST post-implementation has demonstrated the consequences of repealing the GST and reverting to the SST.

“Lawmakers should prioritise public interest over personal pride. Reintroducing the GST should be accompanied by improved mechanisms,” he said.SMS Deen Jewellers chief executive officer Mohamad Shaifudeen Mohamed Sirajudeen said HVGT should not unfairly impact the purchasing patterns of the M40 and B40 groups.

“From our engagement with the government, there was a projection of how much it plans to collect from the HVGT.

“When the GST was in place for the first time, even when the gold price was stable, there was a distinction between buying gold for adornment or investment; this is a crucial point we need to consider,” he said.

However, Mohamad Shaifudeen pointed out that it was unlikely that the HVGT would be implemented soon because the industry would need more time to prepare for it.

The Federation of Goldsmiths and Jewellers Association of Malaysia adviser Datuk Ng Yih Pyng lauded the deferment of the luxury tax, saying that Malaysia is not ready for such a tax regime.

Although the HGVT may appear simple, he said that there are various definitions under the proposed tax.

“It’s complicated and involved many nitty-gritty for each product category and type.

“We hope that this will not be implemented but replaced with something better,” he said.

Ng, who is Tomei Consolidated Bhd managing director, said the Customs Department had held several meetings with his company but nothing substantial was achieved with regards to the HVGT.

“It is hard even for us to offer advice about the threshold,” he added.

Malay Chamber of Commerce Malaysia (MCCM) president Norsyahrin Hamidon questioned the effectiveness of a multiple tax system for different groups and called for the reintroduction of the GST.

“GST has been implemented all over the world. We don’t quite understand why the government doesn’t want to revert to the GST despite research and surveys pointing to its benefits,” he said.

Norsyahrin also suggested that the GST be implemented at a lower rate of between 2% and 3%, adding that the 6% GST introduced previously was not currently feasible.

Asked about the government’s reluctance to revert to the GST, Norsyahrin said the onus was on the government to make the right decision, even if it means swallowing a “bitter pill”.

“The current multiple tax system does not solve problems but rather creates new ones, especially in the supply chain.”

According to him, reverting to the GST would be for the greater good, considering the prevalence of tax evasion incidents.

“Other tax systems being introduced may not be as efficient as the GST which will bring in more income to the country,” Norsyahrin added.

While the government said the delay is warranted by the need for more engagement, industry players said the HVGT would not become a significant contributor to the country’s tax base and have subsequently called for a better tax system in the form of the Goods and Services Tax (GST).

The Malaysian government said on Thursday that the HVGT, or widely known as "luxury tax", has been deferred.
 “The government needs to continue engaging with the industry to ensure the tax principles and legislation can be formulated and drafted carefully," said Deputy Finance Minister Lim Hui Ying.
“The government will announce the new implementation date of the HVGT later,” she said.